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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Es = (%dQs) / (%dPrice)






2. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






3. AFC = TFC/Q






4. The additional cost incurred from the consumption of the next unit of a good or a service






5. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






6. AVC = TVC/Q






7. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






8. The lost net benefit to society caused by a movement away from the competitive market equilibrium






9. Exists if a producer can produce more of a good than all other producers






10. Ed = 1






11. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






12. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






13. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






14. MUx / Px = MUy/Py or MUx/MUy = Px/Py






15. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






16. A firm that has market power in the factor market (a wage-setter)






17. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






18. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






19. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






20. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






21. Total product divided by labor employed. APL = TPL/L






22. ATC = TC/Q = AFC + AVC






23. Two goods are consumer substitutes if they provide essentially the same utility to consumers






24. The marginal utility from consumption of more and more of that item falls over time






25. The output where ATC is minimized and economic profit is zero






26. 0 < Ei < 1






27. A good for which higher income decreases demand






28. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






29. The total quantity - or total output of a good produced at each quantity of labor employed






30. Exists at the point where the quantity supplied equals the quantity demanded






31. The most desirable alternative given up as the result of a decision






32. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






33. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






34. Entry of new firms shifts the cost curves for all firms upward






35. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






36. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






37. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






38. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






39. TR = P * Qd






40. Ed > 1 - meaning consumers are price sensitive






41. Ed = (%dQd)/(%dP). Ignore negative sign






42. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






43. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






44. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






45. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






46. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






47. Ei > 1






48. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






49. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






50. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good